Like most folks today, I’ve really no inside knowledge about why Don Schroeder quit, was fired or whatever from the ‘apparently’ top job at the iconic coffee/donut/soup/sandwich chain.

The news today is simply:

“Tim Hortons Inc. (THI-T) is racing to find a new chief executive officer after the surprise departure of Don Schroeder, sparking uncertainty about the coffee-and-doughnut chain’s international expansion strategy as its domestic business shows signs of weakness.”

Compare that to this story clip from back in September of last year under the title, ‘How Tim Hortons will take over the world.’

“Don Schroeder is the guardian of that famous flavour, not just by virtue of being Tim Hortons’ CEO, but also because he’s the senior coffee expert in the executive ranks. Twice a week (if he’s not on the road), he sits down at this table for a cupping. The man to his side, similarly sporting a crisp, white, monogrammed lab coat, is Kevin West, Tim Hortons’ director of coffee operations. ”

Until some university or college offers me a teaching job I’ll have to be content to discuss the occasional “CASE STUDY” here on my website. What makes this an intriguing study right now, besides the fact that without knowing any facts we can enjoy some intellectual banter, is that it raises a number of cool business issues for debate:

a) was the departure a board level issue (an product of ‘group think’ – like the Kennedy administration and Bay of Pigs), or maybe a personality conflict, or just another example of that endemic phenomenon we’ve all suffered at some point – scapegoating?

b) does it have anything to do with the company’s strategic initiative (was it the CEO’s idea or the board’s idea?) to lead a business charge into the U.S. Market only to fail as so many other Canadian franchises have done in the past?

c) was it an organizational/responsibility flaw?

d) can employees or job seekers take away any lessons from a case like this?

First, have a gander at the stock chart:

CEO did good enough job for shareholders!

Speculation is always fun. In regards to a) above, it could be as simple as a bit of a personality conflict evolving between the CEO and his boss and Executive chair, Paul House, who once held the top job in the company and still clings to some powers? From a compliance standpoint, why there would be such a thing nowadays in a widely held public company as an “Executive Chairman of the Board” anyway I don’t know! When a company (typical in Canada) is literally majority owned by an individual or family it’s not unusual – it might ensure the major owner’s interests are looked after. It’s a recipe for conflict in any event. As any employee knows – when you’re responsible for the results but not the decisions – you’ll be blamed when things go wrong, and get no absolutely no credit when they go well. Like many in my industry, I’ve made a (very modest) living being that sort of scapegoat once in awhile (and on rare occasions the guy who really did screw up). However I deliberately practiced the opposite when it came to those people working for me – I gave them enough rope to make decisions, and when things went bad, rather than point the blame at them I’d take responsibility – makes me a good boss and mentor i suppose but it is a tough burden to haul around every day.

Concering b) above, I recall early in my career going on a tour of White Stores, a chain that Canadian Tire (also a Canadian retailing icon) bought down in Texas. The company was intent on US expansion (like many foolish Canadian businesses) and talked themselves – group think -into buying the US chain hoping the same formula so dear to Canadians (auto parts, some hardware….who doesn’t know the store?) would also find favour south of the 49th Parallel. FLOP! Tim Hortons effort may have also been a group think decision and:

If it was board initiative that the CEO wasn’t keen about – then when it proved difficult (some stores seemed to do okay, but many were closed so NET it’s a failure) rather than listen to “I told you so” from the CEO repeatedly – have him leave.

or

Maybe it was the CEO who wanted to expand internationally, and when the ‘Executive chair’ and the board wanted to cut the purse strings on his initiative the CEO resigned in frustration.

c) it is possible it’s just a question of ‘who’s in charge?’ The CEO wants the responsibililty he feels he’s due (should come with the title) without sharing it with the former boss who’d normally step off completely. Maybe the board doesn’t feel he has the ‘global’ perspective needed to see the strategy through?

Case studies like this are fodder for business school students and organizational behaviour (or HR) professionals. Why? There’s never a good answer. Trying to dream up preventative or remedial measures (nobody wants the stock to sell off for very long) is challenging indeed.

d) trying to understand (and the best one can do is try) behavioural dynamics like these is useful for the new employee, someone moving into a more responsible job or just getting hired into a new job. Heirarchies in business or politics are riddled with confusion. How many of us have been appointed into a role, only to get battered for doing what you were ‘told’ to do. What one person hears and what another person says may appear identical in print, but the meaning can be miles apart when it comes to the intent of the speaker and the message received by the listener. Oftentimes, there are those people who never actually say what they mean anyway (usually these types don’t ride Harleys..they drive BMW’s). There are lessons galore contemplating these issues for job seekers, employees and managers alike.

As interesting as all this stuff is to mull over, the sad part is that situations like these ones are always caused by emotions, egos and personalities. Businesses shouldn’t have to suffer because of these human frailties. A Tim Hortons up on the road ahead can be a welcome sight for an individual or group riding their motorcycles – a chance to pee, get a hot coffee on a cold day or an ice coffee on a hot one, a bite to eat or maybe just serve as a convenient place to gather before a ride. Several months ago now, some fellow Harley enthusiasts (and even my son) complained that Tim’s coffee seemed to taste different…..weaker maybe, thinner perhaps but noticeably different. Often a sign of trouble ‘brewing’ can be as simple as messing with a proven formula to shave a few (millions?) dollars from expenses. Expecting Americans to understand Tim Hortons (or Canadian Tire) is messing with a formula, just as much as reducing the number of coffee beans per cup would be. Unfortunately, management teams are under so much pressure these days to grow, that once they’ve saturated the domestic market they’ve no choice but to persue a strategy riddled with risk outside their core market. A couple thousand years ago, the Roman Empire should have found an alternative to expansion & playing offense (at ridiculous expense) and adopt instead a policy of ‘stability and defense.’ It’s demise or implosion might have been prevented. It’s the human conundrum – the same ambitions that have fueled innovation, progress and the prosperity of civilization also sew the seeds for excess and ultimately implosion. It’s the same for empires, countries, industries and companies. This clip says it all…

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About Mal Spooner

Malvin Spooner is a veteran money manager, former CEO of award-winning investment fund management boutique he founded. He recently authored A Maverick Investor's Guidebook which blends his experience touring across the heartland in the United States with valuable investing tips and stories. He has been quoted and published for many years in business journals, newspapers and has been featured on many television programs over his career. An avid motorcycle enthusiast, and known across Canada as a part-time musician performing rock ‘n’ roll for charity, Mal is known for his candour and non-traditional (‘maverick’) thinking when discussing financial markets. His previous book published by Insomniac Press — Resources Rock: How to Invest in the Next Global Boom in Natural Resources which he authored with Pamela Clark — predicted the resources boom back in early 2004.

Thanks for the post. Your comment about management teams being under pressure to grow struck a chord with me….made me think of some of the recent deals done in the mining industry out of necessity to grow. Many of these deals appear to be “forced” at the time and, in the end, don’t work. I have often wondered if those were managment or board driven…

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